Every time you pay your electricity or heating bill, you’re lighting your money on fire. That is, you’re trading money for the energy released by burning some combustible material — natural gas, home heating oil, wood pellets, etc. So in effect, you’re burning your money.

That’s OK, it’s how a market economy works. You don’t make your own clothes or slaughter your own food or build your own home by hand, you pay other people to do those things. (Excepting some of you in the North Country.) When you trade money for energy, you’re basically burning money. The priority, then, is to burn as little of it as possible.

In New Hampshire, politicians keep preventing you from doing that. In fact, they continue to force you to burn more money for electricity than you would otherwise choose to burn.

On Thursday, legislators overrode Gov. Chris Sununu’s veto of Senate Bill 365. The bill forces electric utility companies to buy power at above-market rates from the state’s six biomass power plants and municipal solid waste incinerators.

The bill’s own fiscal note projected that it would cause electricity rates to rise by between $15 million and $20 million a year. So legislators knew exactly what they were doing. They knowingly voted to make you burn more of your money than necessary when buying electricity.

They’re very practiced at this. Over the years, legislators have passed one law after another to prohibit electric utilities from buying power at the lowest available price.

All of these costs add up. Here are just two examples.

A 2015 study by the Beacon Hill Institute found that New Hampshire’s Renewable Portfolio Standards would raise electricity prices by 3.7 percent by 2025, for a total impact of $70 million.

A previous biomass subsidy bill passed just last year, SB 129, also forced utilities to buy additional power from biomass plants. Its costs were estimated at around $75 million to $100 million.

To understand how these mandates make electricity more expensive, imagine you’re a cave man who needs to build a fire. Og is willing to offer you a bundle of wood he chopped himself for one rabbit pelt. Unk is offering you a bundle of organic, cured, and deodorized buffalo chips for one rabbit pelt and a handful of arrow heads.

You just need a fire. You’ve got a fresh squirrel in your deer-skin sack, you’re hungry, and you’ve got to make a new spear to replace the one you lost when that mammoth ran off with it dangling from its side. (WHY WON”T THOSE THINGS JUST DIE??) So you turn to Og.

At that moment, the clan’s code enforcement officer strides up to remind you of the clan leader’s decree that everyone has to use organic buffalo chips as a fuel source once a week. (Unk is the clan leader’s cousin.) You used wood every day this week. You’ve got to buy the dung.

You give Unk your worst arrow heads, naturally, but now you’re out all those arrow heads and will have to make more. You’re no warmer than you were before. The fire didn’t cook your meat any better. It just cost more because someone with power ordered you to support the organic dung industry.

There are other ways politicians and regulators force prices higher. They can even be politicians and regulators in neighboring states.

Across the country, electricity prices have fallen thanks to the natural gas boom. But the prices fall faster and farther in places where politicians don’t block pipeline construction. In New England (and New York), politicians and regulators have made it extremely difficult to build new pipelines.

As ISO New England has pointed out, though natural gas power generation has grown tremendously in in the last 20 years, “the natural gas pipelines that deliver low-cost shale gas into the region have not been expanded at a commensurate pace.”

Public policy is a major reason why New Hampshire has the fifth-highest electric rates in the country.

Politicians could immediately lower those rates by repealing laws and withdrawing regulations that prohibit utilities from buying power at the lowest available market price.

Instead, legislators continue to add new laws that push prices ever higher.

Utilities want to sell us power for less money. They would if they could. But the state forbids it. This needs to stop. We shouldn’t allow our politicians to force us to light our own money on fire.

New Hampshire Public Radio reported this week on a study showing that rural New Englanders pay a higher percentage of their income on energy. This isn’t really new information. But it was a slow news week and the report’s recommended solutions seemed written to get NPR listeners to spill their morning coffees from their pledge drive mugs from all the vigorous head nodding.

The study concluded that Americans on average spend 3.3 percent of their income on energy, but for rural households the burden rises to 4.4 percent. In New England, rural households spend 5.1 percent.

The proposed solution? Energy efficiency projects. It’s probably a total coincidence that the report was released by a group called the American Council for an Energy Efficient Economy.

It’s true that making homes more energy efficient reduces energy use, thus reducing bills. ISO New England, the non-profit that runs New England’s energy grid, noted in this year’s Operational Fuel-Security Analysis that New England states have collectively spent more than $1 billion to improve energy efficiency, slightly tapering energy demand.

Since 2005, electricity demand in New England has fallen from a combination of the recession, milder weather, increased adoption of small-scale solar power, and energy efficiency investments, according to ISO New England.

Yet energy remains extremely expensive and the region remains at risk of rolling blackouts during periods of peak demand. Another billion dollars on energy efficiency could help shrink demand a little more, but it’s not going to solve the cost and supply problems.

To ensure enough capacity for peak demand times and to bring down prices for everyone — from low-income rural households to major manufacturers — we need more infrastructure and fewer rate-raising regulations like subsidies for politically favored power producers.

ISO New England projects a 4,600 megawatt reduction in power generation capacity by June of 2021. But states and communities are rejecting the construction the new infrastructure needed to replace those megawatts.

ISO New England figures show that in 2000, coal and oil generated 40% of New England’s electricity, and natural gas just 15%. By 2015, natural gas generated 49% and oil and coal just 3%.

Fracking fueled this change. Since 2009, natural gas has become much cheaper than coal and oil (and it produces fewer emissions). But we can’t tap it from maple trees (unfortunately, because flaming maples would be pretty great on Halloween).

We need pipelines to bring natural gas here. Without more pipelines, we’ll continue seeing high prices and more ships from Russia and other energy exporting countries docking in Boston.

In recent years, pipeline projects have been rejected throughout New England with such animosity that you’d think they were importing emerald ash borers or New York Yankees players. For proposing to bring enough fuel to ensure that Red Sox Nation survives winter, they’ve been run out of town. That’ll show ‘em.

We’ve artificially restricted our energy supply and raised rates by blocking construction and heavily regulating the sector. This has hurt rural and low-income residents.

And by the way, our housing policies have done the same thing.

Rural residents tend to live in older homes, and older homes are less energy efficient. The subsidized winterizing of old homes is always the recommended approach, but it is not going to address the underlying problem, which —like energy generation — is one of artificially restricted supply.

Home construction costs are at record highs because of rising labor costs, land costs, lumber costs, credit costs, and regulations. Every one of these costs is being driven higher by government policies — from immigration to tariffs to zoning to building codes to financial regulations. Regulatory costs account for 24 percent of the price of a new home, according to a National Association of Home Builders study.

If we scaled back housing, labor, land use, trade, and energy regulations, we would see energy and home construction prices rise less quickly or even fall. People of all income levels could better afford to buy, heat, and live in new homes.

But untangling those regulatory webs is difficult. It’s simpler to ask legislators to meddle in the markets by passing laws to shield lower-income residents from the consequences of the legislators’ past meddling.

How many lumberjacks live in New Hampshire?

Given the debate over Gov. Chris Sununu’s vetoes of two bills to further subsidize the state’s forest products industry, it’s an important question. No one seems to know the answer.

Supporters of the two bills, Senate Bills 365 and 446, say the subsidies would save 900 jobs. Sometimes they say 1,000 jobs. These figures are supposed to include people who depend on the forest products industry for their own livelihoods.

Maybe. But state data show only about 400 people employed in forestry and logging in New Hampshire. That’s down from the high 400s a decade ago.

Some of those good folks showed up in Concord on Thursday to demand that legislators override Gov. Chris Sununu’s vetoes and add even more subsidies to the already subsidized biomass and solar power industries. This is corporate welfare dressed in flannel.

Legislators know that a direct state subsidy of the state’s dwindling number of biomass plants, financed by tax increases, would be a non-starter. So they found another way to pay for this corporate giveaway: Hide the costs in everyone’s utility bills.

Both bills force utilities to pay above-market rates for electricity, thus raising prices for consumers. Because the rate increases would be mandated by law, they’d have the same effect as a tax hike. But because they’d be hidden in your electricity bill, they wouldn’t show up on any list of new taxes.

Nice trick.

The state Public Utilities Commission estimated that SB 365 would cost the average commercial utility customer in New Hampshire an extra $5.15 a month, which comes to $75.60 a year. In total, the bill would cost ratepayers about $20 million annually.

Utility customers would get nothing in return for that extra $20 million. It’s just a mandatory price increase. Instead of buying electricity from the lowest-cost producer, utilities would have to buy some of it from the state’s biomass plants, which can’t produce electricity as cheaply as their competitors can.

SB 446 would further increase electricity rates (by an undetermined amount) by letting these biomass plants and other producers build large-scale solar systems — and then forcing utilities to buy that solar power at inflated prices.

These aren’t just subsidies. They’re laws that forbid utilities from buying power at the best rates.

It’s critical to understand that because these bills never became law, upholding the governor’s vetoes takes nothing away from the forest products industry in New Hampshire. It simply means that ratepayers aren’t forced to pay them tens of millions of dollars more each year for the exact same product — electricity — that can be purchased from other providers at a lower cost.

Supporters say the bills are needed to save jobs. But jobs are plentiful in New Hampshire right now. What they really mean is that they’d like everyone to pay more for electricity so about 400 people can keep very specific jobs.

The unemployment rate is 3.2 percent in Coos County, 2.3 percent in Carroll County and 2.1 percent in Grafton County. The economy is galloping like wildlife fleeing the booming steps of Paul Bunyon. The issue is not whether jobs are available in the most thickly forested parts of New Hampshire. They are.

The issue is whether the state should forcibly confiscate tens of millions of dollars a year from 1.3 million people in an attempt to preserve specific jobs for about 400 people.

At about $20 million a year, SB 365 alone would generate enough money to pay each person in the forestry and logging industry roughly $50,000. Tuition at Harvard University this fall is $46,340.

If legislators override the governor’s vetoes, they will force Granite Staters to pay enough money in utility overcharges to purchase a Harvard degree for every forest and logging industry worker in the state every four years.

But instead of buying Harvard degrees or any other form of education or training to enable folks in a struggling industry to better survive a changing labor market, Granite Staters will be freezing a few hundred jobs in time — as the world continues to move on. That’s not a good use of $80 million.

These bills also would hurt Granite Staters who are even worse off than the people in the forest products industry. Higher electricity rates will eat into the budgets of low-income residents as well as manufacturers and other businesses. At 7.3 percent, New Hampshire has the lowest poverty rate in the country. But that still comes to about 95,000 Granite Staters living below the poverty level. To provide a handout to 400 employed people, these bills would take money from scores of thousands of low-income people, many of whom have worse employment prospects.

Subsidies can sound nice and compassionate. Most people want to help their fellow man. But subsidies aren’t just help. Unlike free trade, in which both parties win by getting something they want at an agreed-to price, subsidies help some by harming others. They do this because they force people against their will to pay for something they neither want nor need (in this case, high-priced electricity). That’s not compassion; that’s compulsion.

Economic progress, like progress in any field, cannot be achieved by freezing the status quo in place. Government attempts to do so result only in delaying rather than advancing progress.

Following Gov. Chris Sununu’s June 19 veto of two bills to subsidize New Hampshire’s biomass power plants, three of those plants announced that they were winding down their operations. Some blame the governor for the plants going idle. That’s like blaming the National Endowment of the Arts for the demise of jazz.

Jazz, once America’s dominant form of music, in 2014 tied classical as the least popular genre. Chuck Berry, a huge jazz fan, released Maybellene in 1955, dooming the genre that put the “roll” in rock ’n’ roll.

Musical tastes changed, and no subsidy from Washington elites could’ve protected the big bands of the 1940s or the quartets of the 1950s from the rock ’n’ roll revolution.

In the economy, industries rise and fall too, moved by forces that are beyond the control of public officials or elite taste-makers.

The forest products industry in New Hampshire has suffered a decades-long decline triggered by cultural and economic changes no government meddling can reverse.

In 1957, when Berry released his classic song “Rock and Roll Music,” 7,810 people were employed in paper manufacturing in Coos County alone. By 2013, when Robin Thicke topped the charts with “Blurred Lines,” UNH’s Cooperative Extension service reportedthat 7,756 people were employed in the forest products, maple and Christmas tree sectors combined in the entire state. That year, 3,000 more people were employed in forest-based tourism occupations than in production.

(By the way, by 2013 rock ’n’ roll had all but vanished from the Billboard Hot 100, replaced by pop and hip-hop. Only one rock band, Paramore, had a year-end top 100 song that year. If only federal taxpayers had subsidized Guns n Roses….)

Cake, one of the last great alternative rock bands, had a single on its last album called “Federal Funding” in which it mocked government funding for the well-connected. Cake got it what many people don’t. Government subsidies benefit political insiders at the expense of everyone else.

No one wants loggers to lose jobs they love. But the notion that the state’s timber industry can be saved by forcing electricity ratepayers to subsidize a handful of inefficient biomass power plants was never based in a realistic assessment of the New Hampshire economy, the forest products industry, basic economics or clever alternative rock lyrics.

New Hampshire’s economy has evolved over the centuries, as all economies have done since the rise of capitalism and democratic governance. Subsidies for favored industries can only delay the inevitable, and at a high cost.

A report last year concluded that Maine has spent $250 million to prop up its fading biomass industry. New Hampshire, which has for years forced electricity ratepayers to subsidize the industry, would make its economy weaker, not stronger, by continuing this practice.

Biomass plants are in trouble because it’s cheaper to create electricity by burning natural gas than by burning wood. If forcing people and businesses to buy more expensive wood-generated electricity was good for the economy, then we would have the best economy in the country simply by passing laws mandating that people buy only New Hampshire-made goods and services.

Imagine. Instead of driving dangerous automobiles, we could all be riding around in luxurious Concord Coaches. Instead of using national airline companies, we could sail to Europe on gorgeous tall ships built in Portsmouth. Sure, it would be hugely expensive and wasteful for consumers, but think of all the jobs that would be saved!

Sadly, that’s not how the economy works. States can only hurt economic growth by forcing people to pay higher prices for locally made goods and services.

Trying to freeze some economic sectors in time is never good policy, but it’s especially bad when the state has so many job openings that it’s experiencing a severe worker shortage. The best move is to let people transition from jobs in declining industries to jobs that are in higher demand and offer a brighter future.

Three renewable energy bills awaiting action by Gov. Chris Sununu are in conflict with the state’s revised 10-Year Energy Strategy, which the governor championed in April. A veto of these bills would be consistent with the state’s energy plan and with the governor’s goal of fighting increases in New Hampshire electricity rates. Letting the bills become law would undermine the plan and encourage legislators to ignore it going forward.

The 10-Year Energy Strategy, released by the Office of Strategic Initiatives in April, represents an important and long-overdue shift in state energy policy. Acknowledging the negative economic impact of the state’s high electricity costs, the strategy makes lowering those costs a top priority.

“Addressing energy costs is a critical goal for New Hampshire,” the strategy states. “Expensive energy – or pursuing policies that raise the cost of energy – directly and negatively impacts New Hampshire families and businesses and the quality of life in our state. As such, the priority of this Strategy is to organize goals around cost-effective energy policies.”

Senate Bills 365, 446 and 577 all conflict with the state’s goal of lowering energy prices. Each one would push electricity rates higher for the sole purpose of forcing ratepayers to subsidize a handful of renewable energy businesses.

Senate Bill 365 would require Eversource to pay above-market rates to the state’s six biomass power plants.

Senate Bill 446 would expand the state’s net metering program to include biomass power plants. The net metering law forces utilities to buy electricity from qualifying renewable generators at above-wholesale rates.

Senate Bill 577 would extend an agreement through which Eversource buys power from the Burgess Biopower plant in Berlin at above-market rates.

Each of these bills deliberately raises New Hampshire electricity rates in direct contradiction of what the state’s new energy strategy describes as the “critical goal” of reducing those rates.

The stated goal of these bills is to preserve several hundred jobs in the forest products industry. Yet by pushing electricity rates ever further upward, these bills jeopardize tens of thousands of jobs in other industries, particularly in manufacturing, which employs 70,000 people in the Granite State.

In an April statement announcing the new energy strategy, Gov. Sununu emphasized the importance of prioritizing low energy prices.

“New Hampshire has made great strides over the last year to reinvigorate our economy and to reaffirm our commitment to being open for business,” Sununu said. “Short term political calculations of the past must give way to long-term investments for the future. We are working hard to lower our electricity rates – some of the highest in the nation – and today’s energy plan will chart New Hampshire’s course forward.

“Whether it’s the family working hard to make ends meet or the business that has to put off hiring new employees, high electricity costs weigh down on everyone – especially the elderly and those on fixed incomes. It’s time for change. New Hampshire’s 10 Year State Energy Strategy will address our urgent needs. This plan sets the stage for New Hampshire to finally get out of the business of picking winners and losers in the energy market.”

The Josiah Bartlett Center for Public Policy agrees that New Hampshire’s economy is best served by an energy policy that ends the practice of “picking winners and losers in the energy market” and instead commits to lowering prices by removing state interventions that raise rates.

These three bills conflict with that goal and continue the outdated and discredited practice of rigging the energy markets to benefit politician-preferred groups at the expense of consumers.

Housing and utilities comprise the largest portion of household budgets. In only nine other states and the District of Columbia do residents spend more on those two items than Granite Staters do, per Bureau of Economic Analysis data. Yet legislators have not been keen to reduce those costs for the people who elect them.

On the contrary, they often prefer to pass laws that make those items more expensive.

So the release this week of a new 10-Year State Energy Strategy that set cost efficiency as its primary goal was a big deal. The previous strategy, set in 2014, focused on manipulating energy markets to favor expensive and inefficient priorities such as renewable energy, with little attention given to the cost that would fall to consumers.

To understand the magnitude of the shift, imagine a hippie folk rock act ditching the acoustic guitars, cutting their hair and putting out an R&B album — a good R&B album.

“Addressing energy costs is a critical goal for New Hampshire. Expensive energy – or pursuing policies that raise the cost of energy – directly and negatively impacts New Hampshire families and businesses and the quality of life in our state,” the new energy plan states. “As such, the priority of this Strategy is to organize goals around cost-effective energy policies.”

The plan does not oppose all subsidies for renewable energy initiatives. It does advocate limiting any such subsidies to the start-up period to prevent ongoing cost-shifting.

This consumer-focused approach to energy policy is at odds with several bills in the Legislature this session to continue or expand subsidies of inefficient biomass power plants. Senate Bill 446 would further subsidize biomass facilities and solar arrays. Senate Bill 365 would further subsidize biomass facilities. Senate Bill 577 would further subsidize biomass facilities.

The permanent ratcheting up of electricity rates by compelling ratepayers to subsidize politically favored businesses is a long-standing New Hampshire practice. The new energy strategy discourages this. Its focus on lowering rates has drawn praise from the state’s ratepayer advocate. Whether legislators will respond by reconsidering their support for higher rates is the question.

Local housing regulations vs. consumers

As with energy, housing costs are rising when they could be stabilizing. There is huge demand for new housing in New Hampshire, and builders are eager to fill it. The problem is that local regulations make it extremely difficult to build new homes or apartments to respond quickly to surges in demand.

Those regulations also add costs that make it hard, if not impossible, in many communities to build residences that lower-income families can afford.

New Hampshire’s average monthly rental rates are higher than Maine’s, Vermont’s and Rhode Island’s and are comparable to Connecticut’s. Average rental rates in Connecticut are only $68 higher than in New Hampshire for a one bedroom and $63 higher for a two-bedroom. Median rents in Manchester are higher than in many larger cities such as Philadelphia, Atlanta and Orlando.

With a booming economy, thousands more jobs than we can fill, and a statewide rental vacancy rate below 5 percent for 18 of the last 20 years and below 2 percent for the last years, the rate of home construction in the state should be rising aggressively. It is rising, but not at rates that would come close to filling demand. Local housing restrictions are in the way.

A fix to help builders navigate these restrictions more quickly and less expensively is offered in Senate Bill 557. It would create a housing appeals board to which developers could appeal decisions of local boards, committees and commissions. Now, appeals go to the superior court. It often takes years for an appeal of a local housing decision to reach a resolution in court.

The housing appeals board would take these appeals out of the court system and resolve them quickly. The board would be required to hold a hearing within 90 days of receiving an appeal and make a decision within 60 days of the hearing. This would dramatically speed the appeals process while eliminating expensive legal costs for both builders and municipalities (taxpayers).

At a hearing in the House Finance Committee this week, no one spoke against the bill and the New Hampshire Municipal Association did not oppose it. Nonetheless, the committee voted to refer it to interim study. It will come before the full House on Thursday.

If legislators followed the lead of the Office of Strategic Initiatives and made reducing costs a top priority in both of these areas, the impact on Granite Staters could be dramatic. Making the state a lower-cost place to live and work would bring economic benefits far exceeding any that could come from propping up obsolete power plants or ignoring the costs of local land use regulations.

Did you know that you’re the target of multiple state schemes to transfer wealth quietly to a handful of politically favored businesses scattered around New Hampshire? Well, you are, unless you live off the grid and are receiving this email on a home-brewed server built with whittled sticks and hand-mined silicon and powered by hungry marmots.

If you use electricity, the state is deliberately transferring money from your bank account (or buck-skin pouch if you’re turning survivalist but haven’t fully migrated off the grid yet) to various businesses liked by a majority of legislators.

The Renewable Portfolio Standards and Regional Greenhouse Gas Initiative are well-known plots to subsidize the types of energy businesses legislators prefer over the ones that offer customers the best rates. Less well known are other schemes to subsidize biomass plants.

New Hampshire Business Review had a good overview this week of two Senate-passed bills that would expand these subsidies.

SB 365 would compel New Hampshire’s default energy providers to buy power from small generating facilities (biomass plants, waste incinerators and hydro-power dams).

The bill states that these small power plants “are at-risk due to energy pricing volatility.” That is a creative interpretation. The plants are at risk because they struggle to compete on price with power plants that use lower-cost fuels such as natural gas.

Senate Bill 577 requires the Public Utilities Commission to open up for reconsideration (with the legislative intent of expanding) an existing order allowing a power purchase agreement between Eversource and the Burgess BioPower Plant in Berlin. Under that agreement, Eversource buys power from the Berlin plant at above-market rates until Eversource customers have overpaid for their electricity by $100 million.

Under pressure from legislators, Eversouce entered into this agreement in 2011. The $100 million in customer overpayments was not supposed to be hit for 20 years, but the halfway point was passed last year. SB 577 was written to keep this gravy train going.

Then there is Senate Bill 446, “an act relative to net energy metering limits for customer-generators.” As was explained in testimony at as the House Science, Technology, and Energy Committee public hearing on Wednesday, the bill’s title is not an accurate representation of its primary purpose. Its purpose is to subsidize New Hampshire’s six remaining biomass power plants.

Under net metering, people with small solar arrays can sell power to utility companies. The catch is that the state requires utility companies to buy the power at a rate set above the wholesale rate, creating a subsidy. This transfers money from ratepayers (you, your employer, your local government, your school district, etc.) to these “consumer-generators.”

SB 446 lets large-scale renewable power generation facilities that produce between 1 and 5 megawatts of electricity claim net metering subsidies (at a rate set by the Public Utilities Commission). It further states that facilities generating up to 25 mw can be paid under the net metering scheme for their first 5 mw of electricity. This huge expansion of the net metering subsidy was designed specifically to transfer your money (and everyone else’s) to the state’s six remaining biomass plants (though the bill also includes large-scale solar projects).

At the public hearing on Wednesday, numerous speakers said the subsidy was critical because without it 900 jobs in the wood products industry would be lost. Though sponsors could not say how much the bill would cost ratepayers, no one disputed an estimate of $20 million per year.

So to save 900 jobs in a state with a 2.6 percent unemployment rate and more than 15,000 job openings, legislators want to make everyone else in the state — including the employers of the state’s remaining workforce of more than 703,000 people — pay $20 million more a year for electricity.

New Hampshire Employment Security projected just this month that New Hampshire would produce 83,822 job openings this year. That’s 82,922 more jobs than would be lost if the state’s six biomass plants closed.

It should be obvious that it’s not good policy to try to save 900 jobs (if that) in a dying industry by ratcheting up electricity rates by tens of millions of dollars a year, thereby jeopardizing thousands of jobs in thriving manufacturing and other businesses. Yet this bill still passed the Senate. Maybe all the Senate’s calculators are broken.

(This essay was originally published in our weekly email newsletter of March 30, 2018. Sign up for our newsletter here and get a fresh take on a hot New Hampshire issue every Friday.  If you don’t like them, you can unsubscribe at any time.)

January 2017

By Michael Sununu

Among the many drivers of unsound public policy in this day and age, perhaps the most odious is the alarmism over changes in climate that are supposedly driven by human activity. Time and again, we have seen costly, unjustified, and economically destructive public policy implemented in the name of climate protection, proclaiming that humanity can and should micromanage the earth’s climate, the largest and most complex system mankind will ever encounter. The justification for these costly actions is based on flimsy evidence, exaggerated claims, and a profound ignorance of the natural evolution and cycles of our climate systems. National, state, and local governments have all acted to impose damaging regulatory regimes, costly mandates, and harsh anti-development initiatives in the name of climate change, and New Hampshire has not been immune to the consequences.

On November 30, 2016, the New Hampshire Coastal Risk and Hazard Commission (“NHCRHC”) released its final report (http://www.nhcrhc.org/wp-content/uploads/2016-CRHC-final-report.pdf). This report is 124 pages of alarmist hand wringing, with a litany of recommendations that would expand government and strangle development in the Seacoast area. The apparent goal of the authors is to prod state legislators, bureaucrats and local officials to institutionalize acceptance of anthropogenic global warming (AGW) in state law and state regulations, based on the premise that sea level rise (SLR) threatens our Seacoast in an unprecedented fashion. The unstated result of these actions would be to cede control from local towns to the state, impose huge barriers to development and undermine the economy in the region.

Unfortunately, there is not enough critical analysis and skepticism of the basis for the fears outlined in the report. The result is a document heavy on fearful scenarios, calls to action and demands for spending.

This paper is an attempt to put much of the science in its proper context, educate the reader with real data, raise the types of questions that should have been raised by the NHCRHC, consider the nature of the actual risks involved, and question whether the recommendations are really what the state, the region, and local communities need at this time.

Download the full report: NHCRHC Assessment

Don’t Make the Rest of Us Pay for Your Solar Subsidies

Charles M. Arlinghaus

 

Solar advocates are fighting to protect and increase the subsidized, above-market electric rates they get through a program called net metering. The debate isn’t about whether to allow solar energy but over how much of a subsidy to give solar and how to pay for the electric grid. As with so many issues, reasonable compromises are possible that allow every residential solar panel to be treated equally with reasonable accommodation but limited subsidies.

 

New Hampshire, like most states in the country, has a government program called “net metering” that serves to encourage small scale usage of solar panels as well as a small amount of wind energy. One benefit of producing your own electricity is that you don’t buy any during the periods when your panel or wind turbine is producing electricity.

 

But you can’t actually “go off the grid.” Solar, for example, only produces electricity about 10-15% of the time and you need electricity the other 85% of the time too. What’s more, you can’t store almost any of the excess you produce when the sun is shining. There are no effective ways to store electricity on a large scale so it must be produced essentially as needed — when you flip the light switch, there must be a turbine turning somewhere that very second and you must be connected to it by a wire.

 

Under net metering, an individual or other very small producer puts his excess power back into the grid. and this is where the subsidy comes in.

 

It would be difficult or impossible for a homeowner to market and sell the power by himself. So, the electric utility is required by the state government to buy your excess power keeping track of it through what is called a smart meter. The utility is required to buy the extra power not at the normal rate it purchases power we use — the market price — but rather at the retail rate, a rate that is double or triple the rate at which it would otherwise purchase power.

 

In other words, the state’s net metering law forces utilities to purchase power from individuals at an above market, subsidized rate — an excess charge that is then paid for by other customers.

 

Because this arrangement is a subsidy that raises the cost of electricity, the amount other ratepayers are required by law to subsidize is capped at a total of 50MW of electricity.

 

A program that started as something of an aside for the homeowner putting a few panels up on his roof has grown to include smaller businesses and municipalities seeking to arbitrage the enhanced rate. Solar marketing companies have done a good job utilizing the subsidy and other government cash incentives to expand the program and they’ve reached the cap.

 

Supporters of eliminating the cap believe the program would expand dramatically if subsidies were more broadly spent but therein lies the problem.

 

It is not particularly fair for poor and middle class ratepayers to subsidize the electricity of wealthier consumers who want to get paid back for their solar panels. The $40 -$50,000 cost of installing panels is beyond the savings account of most NH consumers.

 

When the total subsidized load is limited to about 1% of peak load, while still a targeted subsidy it’s small enough that people don’t lose much sleep over it. But advocates would have us eliminate the cap and extend the subsidy to larger and larger solar arrays by getting bigger and bigger businesses into the act, even extending the program to other means of production like hydro — all at an above-market subsidized rate.

 

Remember that every kilowatt of electricity we force the utility to purchase through the subsidy program and other ratepayers to pay for is a kilowatt that could have been bought at less than half that price somewhere else. NH already pays about $500 million more per year for electricity than it would if its costs were average — $527 million in 2014. This program is only a little tiny bit of that right now but every little bit matters.

 

On the other hand, there is an easy, market-based compromise that helps the wealthy solar advocate and doesn’t penalize the rest of us. If we, the ratepayers, bought your excess power at the rate we would otherwise pay — the current market rate — there would be no need for a cap. No subsidy, no cap.

 

September 2015

Josh Elliott-Traficante

In July the EPA released the final rules for its Clean Power Plan. This plan, drawn up under the authority of the Clean Air Act and championed by President Obama, aims to cut carbon emissions from power plants by 32% by 2030. To achieve that goal, the EPA has assigned targets for each state to meet as part of that overall effort, and has given states two options how to reach them. The first imposes emissions standards on fossil fuel fired plant, called the Rate Based Goal, and the second is a complex formula based on current plants, improved efficiencies, and increasing renewable production called the Mass Based Goal. New Hampshire’s assigned target based on emissions standards would cut emissions by 23%, while the formula based reductions call for a 14% cut in emissions.  While either are a tall order, it is an improvement over the first draft of the rule, which expected the state to cut emissions by 46%.

In order to comply with these rules the state must either submit a plan to the EPA, or ask for an extension by September 2016. Mandatory reductions must begin in 2022.

The Rate Based Goal: Not All Power Plants are Created Equal

Under these rules, most of New Hampshire’s power plants are excluded. Of the 153 power generating units in the state, only eleven units located at five plants will be subject to this rule. Three of those plants, Merrimack Station, Schiller Station, and Newington Station are owned by the public utility Eversource Energy[i], while the other two, Newington and Granite Ridge are owned by private companies. Despite the rule only applying to those five power plants, they supply roughly half of the electricity generated in the state.

Power Plant Owner Generation

(Nameplate Capacity)

Fuel Source Location
Merrimack Station Eversource Energy 460MW Coal Bow
Schiller Station 100MW Coal or Oil Portsmouth
Newington Station 414MW Oil or Natural Gas Portsmouth
Granite Ridge Granite Ridge Energy 900MW Natural Gas Londonderry
Newington Essential Power LLC 605MW Natural Gas Newington

 

Under the rate based rule, by 2030 carbon emissions for coal fired plants would be capped at 1305 lbs/MWh[ii], while natural gas fired plants would be capped at 771 lbs/MWh.[iii] Based on the makeup of the state’s generation assets listed above, this gives the state a ‘blended’ rate of 858lbs/MWh.  As of 2012, carbon emissions for coal fired plants in the state averaged 2,382 lbs/MWh, while natural gas fired plants averaged 878lbs/MWh. If the state chose this option for complying with the rule, the state’s coal fired plants would need to reduce the carbon intensity of their emissions by 46% and natural gas plants by just over 12%.

In theory, to meet that goal, the state could require all of the coal fired plants to switch over to natural gas if they wanted to continue to operate, or shut down. Combined with small improvements to natural gas plant efficiency, that would be enough to meet the Rate Based goal. Whether or not the EPA would accept such a plan remains to be seen.

For those power plants not subject to this rule, such as the nuclear power plant in Seabrook, or any of the various hydroelectric dams scattered around the state, most are exempt because they do not emit carbon. Of those that do emit carbon, some will not be required to cut emissions either due to their size or the end use of the electricity, while others such as wood burning biomass are excluded because they are considered renewable.     

The Mass Based Goal:

The other option given to the states is the Mass Based Goal, where the state’s reduction goals, are expressed in terms of total emissions from generation of electricity. Under this framework New Hampshire will be expected to cut emissions by 14% by 2030, with an interim reduction of 8.6% achieved sometime between 2022 and 2029.

Using this method, rather than ordering reductions from specific power plants, emissions reductions are spread over all of state’s the power generation stations. The idea being that doing so further incentivizes the use of renewable energy and conservation, reducing the need for fossil fuel fired generation. Rather than the EPA telling a state where to cut, and by how much, this method gives the state a reduction target, and leaves it to the state to figure out how to get there.

Time Frame Carbon Emissions

(in short tons)

Reduction

(over 2012)

2012 4,642,898 N/A
2022-2029 4,243,492 8.6%
2030 and Beyond 3,997,579 14%

 

How the state reaches that target could include everything from generating more electricity from nuclear, large scale hydro, renewables to conservation measures. As long as the amount of emissions declines, the state will be considered in compliance. 

Compliance:

As mentioned, the states have a decent amount of latitude when it comes to complying with these rules, including which path to take. However, if a state opts to use the Mass Based Goal, it must use as a fall back option the Rate Based Goal. This is because the Mass Based Goals would be impossible to enforce federally by their broad nature, while the Rate Base Goal, being defined, can be.  According to documents filed by the NH Department of Environmental Services to the EPA during the comment period[iv], the state intends to use participation in the Regional Greenhouse Gas Initiative (RGGI)[v] to meet these requirements, presumably under the Mass Based Goal approach. 

Costs:

Despite the EPA repeatedly insisting that the states have choices when it comes to these new rules, the states still have to comply with the rules. In a parallel to Obamacare, it is like insisting there are choices when it comes to healthcare, while requiring people to purchase insurance. Like Obamacare, there are costs involved.

The forcible sidelining of coal, oil, and to a lesser extent natural gas fired power plants and replacing them with renewables will increase electric rates. If states did not have programs such as RGGI or renewable portfolio standards (RPS)[vi] that in-directly and directly mandated electric utilities buy renewable energy respectively, the utilities would not buy it. Not out of some devotion to fossil fuel fired generation[vii], but because those sources are far cheaper than renewables. If they were cheaper, electric utilities would be buying up as much of it as possible, without the government mandating they do so.

Free Market in Action:

Despite this big push by the EPA, carbon emissions have actually fallen by 16.4% since 2005, without government intervention. Why? Natural gas is cheaper than coal. The fracking boom has dramatically increased domestic supplies of natural gas, causing the price to fall. As such, it becomes cheaper create electricity by running natural gas fired power plants than coal plants. In addition, because of this dramatic decrease in price, along with ample supplies for the future, most newly constructed power plants use natural gas as their fuel source, further undercutting coal. In addition to being cheaper, natural gas also emits far less carbon per megawatt produced. A coal fired plant replaced by a natural gas fired plant producing the same amount of power emits far less carbon in the process.

This 16.4% reduction came about purely from free market forces, not government intervention. Unlike government intervention which increases costs, the free market accomplished this while also reducing energy costs. Using a lower cost fuel results in lower energy prices. By letting the free market work everyone wins. Environmentalists get their reduction in carbon emissions, while consumers get lower electricity rates. Rather than use force, let the free market continue to work.


 

[i] Assuming that the ‘Global Settlement’ is approved by the Public Utilities Commission, these plants will be put up for sale in the near future.

[ii] Pounds per megawatt hour is the measure of how much carbon is emitted per megawatt of electricity produced.

[iii] The difference in these rates is an acknowledgment that natural gas emits less carbon than coal does per megawatt produced.

[iv] LINK

[v] Regional Greenhouse Gas Iniative (RGGI) is a cap and trade program among nine northeastern states that applies to all power plants over 25MW. Carbon credits are purchased at auction, with the number of credits available reduced every year.

[vi] Renewable Portfolio Standards (RPS) are a set of standards set in state law that mandate certain percentages of the power used in the state come from renewable sources. These percentages are increased every year. If a utility fails to acquire enough renewable power, alternative compliance payments must be made.

[vii] There is something to be said about the inherent reliability of those types of plants. People and business still need power at night or when the air is calm. Solar plants can see their output reduced to a fraction just from a cloud passing overhead.